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Feds won't intervene in CRTC decision to block Bell-Astral deal

The Canadian Press
Published Friday, October 19, 2012 1:53PM EDT
Last Updated Friday, October 19, 2012 10:10PM EDT

MONTREAL -- The federal government won't get involved in the CRTC decision to block Bell's takeover of Astral Media, meaning the "For Sale" sign could go back up on the specialty TV and radio company.

Industry Minister Christian Paradis said Friday that the Canadian Radio-Television and Telecommunications Commission is an independent commission that makes its own decisions.

"The CRTC operates on an arm's length from the government," Paradis said at an event at the Canadian Space Agency, south of Montreal.

"I understand that they held hearings and they made their decision so at that point I will no longer comment since the decision is still there," he said.

"Bell, I don't know what they will do, but the decision was clear in terms of a conclusion and we do respect what the CRTC said on this regard."

The CRTC nixed the $3.4-billion deal by Bell (TSX:BCE) Thursday, saying it wasn't in the best interest of Canadians.

But chief executive George Cope said Canadians are the losers and BCE's competitors are the winners.

"The cable guys, they won again today in this decision," Cope told BNN, the all-news business channel, owned by Bell Media.

"Consumers lost. The investment community lost. It's the wrong decision for Canada."

Cope also said BCE will ask Cabinet for a "policy review" and for it to send a directive back to the CRTC to say follow the existing rules. He said the CRTC overestimated Bell's share of the English-speaking market because it did not include U.S. content viewed by Canadians.

But with Paradis' comments, the federal government has shown little appetite to intervene.

A CRTC spokesperson has said a challenge could go to the Federal Court of Appeal rather than to the government.

Cope said based on the ruling, he doesn't believe that BCE would be allowed to bid on Astral's assets if they were put up for sale again.

The surprise decision by the CRTC was announced after stock markets closed Thursday and marked the first major ruling for newly-installed commissioner Jean-Pierre Blais, who took over in late June.

Blais said had the regulator allowed the deal, BCE would have controlled almost 45 per cent of the English TV viewership and almost 35 per cent of the French. As well, it would have become the largest radio station operator in Canada and would have controlled over half of TV pay and specialty services.

Bell claims its ownership stake in English-language television after the Astral acquisition would be closer to 33.5 per cent when including U.S. channels, a level that it believed to be under the CRTC's threshold.

Astral Media Inc. shares tumbled 16 per cent in response to the decision that blocked the friendly takeover of company. Astral owns specialty TV and radio stations, including the pay TV channel, The Movie Network.

National Bank Financial analyst Adam Shine said there is likely no other sole buyer for Astral.

"Assuming Bell moves on, we don't see any other party stepping forward to bid on Astral in totality," Shine wrote in a research note.

"Corus and Rogers would have to be considered possible bidders for Astral's English-language assets, with Transcontinental a potential player that may seek to acquire French-language assets or more," Shine said.

The shares had been trading at about $36.25 before the deal was announced on March 16, but immediately shot up after Bell was set to pay $50 per share for Astral's class A non-voting shares and $54.83 for the company's class B subordinate voting shares.

Astral stock remained above $49 for months, but weakened after opposition to the deal intensified in August and investors began to speculate regulators would require changes to appease concerns about concentration of media ownership and the impact on BCE's rivals.

For the most part, however, industry watchers had expected the deal go through with some modifications instead of the outright rejection by the CRTC.

"To our knowledge, there is no precedent for Cabinet intervention in a broadcasting merger and acquisition transaction," McReynolds wrote in a research note.

"Furthermore, the breadth of the expressed CRTC concerns and overall lack of clarity around the regulatory framework underpinning this decision, make another bid for Astral by BCE unlikely, in our view."